While thermal coal has embarked on an astounding surge, natural gas has recovered and crude oil has rallied more than 70% from 13-year low struck in January, uranium has consistently weakened this year.
The price of U3O8 is down by 45% in 2016 with the UxC broker average price sliding 4.8% last week to finish at 18.75 per pound on Friday. Current levels are the cheapest spot uranium has been since mid-2004.
Today’s price also compares to an all-time high of nearly $140 a pound reached in June 2007.
The long term price, where most uranium business is conducted, is languishing around $36 a tonne, levels not seen in a decade.
Uranium’s weakness persists despite strong fundamentals with only reactors already being built – 66 in total, mostly in China – expected to increase the global need for uranium by a fifth from today’s levels.
[pullquote type=”right|left|full]”Something significant probably needs to happen on the supply side to alter the current market trajectory
But in the short term there seems no relief in sight for the battered industry. Following the Fukushima reactor meltdown in 2011, market expectations were that Japan would move quickly with restarting their reactors, but 38 remain shut five years on.
Uranium that would have been delivered to Japan is being stockpiled. UxC estimates global inventories as high as 1.4 billion pounds of which some 800m pounds are sitting utilities and most of the remainder with the Russian and US governments.
While not all stockpiles can easily be brought onto the market, roughly 173 million pounds are needed per year to feed the world’s more than 400 operable reactors which means enough uranium is above ground for the next eight years.
The Wall Street Journal quotes Jonathan Hinze, international executive vice president at Ux Consulting as saying utilities, suppliers, and traders “are all sitting on relatively high levels of inventory”:
“There is little incentive or ability to buy and hold more for the future, even at these very low prices.
“Something significant probably needs to happen on the supply side to alter the current market trajectory.”
In a recent commentary Haywood Securities suggest the industry is coming around to the idea that current weakness may not be a fleeting phenomenon:
“There does not appear to be any clear or new smoking gun for the recent more precipitous decline in uranium prices as market fundamental seemingly retain more-or-less the status quo since the beginning of the year.
[pullquote type=”right|left|full]”There does not appear to be any clear or new smoking gun for the recent more precipitous decline
“Some commentators have suggested there is a growing acceptance, or realization, of the market’s actual functional state-of-play.”